Polselli v. IRS

The IRS may issue summonses to determine whether a taxpayer owes money and also to collect any outstanding liability. When the IRS conducts an investigation for purposes of “determining the liability” of a taxpayer, it must provide notice, 26 U.S.C. §7609(a)(1). But once the IRS has reached the stage of “collecting any such liability,” §7602(a)—which is a distinct activity—notice may not be required, §7609(c)(2)(D).

Polselli underpaid his federal taxes between 2005-2017. An IRS investigation determined that Polselli was liable for the unpaid amounts and other penalties, and entered official assessments against him for over $2 million. A Service officer issued several summonses to third parties, but did not provide them with notice. The third parties moved to quash the summonses, but the District Court dismissed and the Court of Appeals affirmed. Polselli argued that there is an exception to the notice requirement where a party has a legal interest in what is being summoned. The IRS may issue summonses to determine whether a taxpayer owes money and also to collect any outstanding liability.  When the IRS conducts an investigation for purposes of “determining the liability” of a taxpayer, it must provide notice, 26 U.S.C. §7609(a)(1).  But once the IRS has reached the stage of “collecting any such liability,” §7602(a)—which is a distinct activity—notice may not be required, §7609(c)(2)(D). The Court explained that Congress could have included a legal interest requirement; however, they did not do so. As such, the exception to the notice requirement under §7609(c)(2)(D)(i) does not only apply where a delinquent taxpayer has a legal interest in accounts or records summoned by the IRS under §7602(a). AFFIRMED.